Want a better mortgage rate than you imagined, or a better rate than you got on your first mortgage? Here are the tips you need to follow.
Did you know that the average mortgage rate in America is 3.97 percent? If your mortgage rate is higher than that, then you are not alone. Surprisingly, some people pay as high as 4.5 percent on their mortgage rate. However, you haven’t got to go insolvent to repay your loan. Here are seven steps to getting a better mortgage rate like a pro.
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Increase Your FICO Credit Score
You may be wondering what’s the biggest factor in determining mortgage prices. The answer is easy: high FICO credit score. In fact, increasing your FICO score is an amazing way to save plenty of money on loans. How can you get an 800 FICO score? Fortunately, there are several ways to improve your credit score. For example:
- Make bill payments on time to avoid late fees.
- Pay off old debts as quickly as possible.
- Limit the number of credit cards you use.
We put plenty of emphasis on this: if you follow our advice, your credit score will improve in no time!
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Find Better Mortgages and Home Prices
Believe it or not, the biggest factor in determining mortgage prices is the price of the house you are financing. As if that weren’t enough, there are also three types of loans for mortgages, including:
- In accordance
- Perfect fit
- Jumbos
What is an appropriate loan? According to mortgage lender FreddieMac, the suitable loan amount is at least $424,000. Not only that. Highly appropriate loans are reserved for those who live in costlier areas of the US. That’s why your loan can be as high as $636,150 to qualify for this sort of mortgage. Lastly, jumbo mortgage loans are much larger than matched and super compliant loans. That’s why it has the highest mortgage rates.
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Be Careful Where You Buy
Have you noticed that the most costly areas in the country have the highest mortgage rates? As a result, most people who choose to buy homes in these expensive areas qualify for very appropriate mortgages. How do you get a good mortgage in a good location? The key is buying a house in a more rural town or city. That way, you can shop for lenders with better mortgage reviews.
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Make a Large Advance
Everyone knows that mortgage lenders hate taking unnecessary risks. That means the less risk your credit score puts on the lender, the better. Expect to see lower interest rates and higher equity when you put down a hefty down payment. But how big should your down payment be? Experts recommend that you set aside at least 20 percent of your home’s value. If you haven’t got that 20 percent available, it can result in:
- Increase in interest rates
- Personal mortgage insurance (PMI)
Of course, paying for rising interest rates or PMI Lots better than defaulting on a loan within the first year on your new home.
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Get Shorter Loan Term
Another great way to get a lower mortgage rate is to get a shorter loan term. Why is this important? Because choosing to repay your loan as soon as possible greatly reduces your mortgage rate. For example, interest rates on 15-year mortgages are much lower than those on 30-year mortgages. Not only that but choosing a brief term loan will help you pay back your debts faster than longer ones. Bottom line: While there’s nothing wrong with getting a 30-year mortgage, you can at all times save extra money with a 15-year mortgage.
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Consider a Fixed and Variable Rate Mortgage
Do you know what the difference is between a fixed and variable rate mortgage? First of all, variable rate mortgages are cheaper than fixed rate mortgages. But there is a catch: variable rate mortgages will be hiked up every now and then, while fixed rate mortgages will not. Plus, you can apply for an adjustable-rate (ARM) mortgage. ARMs like the 5-1 ARM are an amazing way to:
- Get a lower mortgage interest rate.
- Make payments every now and then.
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Choose the Right Type of Mortgage
How do you know which mortgage is right for you? While there are various types of mortgages, there are some that are popular such as:
- Veterans Affairs Loan (VA).
- Federal Housing Administration (FHA) loans.
- United States Department of Agriculture (USDA) loans.
Fortunately, there are also housing programs for low-income people. All you must do is meet the mandatory financial requirements. If you qualify for a low-income mortgage, then you can earn below-average interest rates. For those who do not qualify for a low-income mortgage, there are still some options for you, such as a conventional FHA loan. Don’t know where to start? You can learn more about home loans with Hunter Galloway. If you enjoyed this article, share it on social media!
Searching for a better mortgage rate does not must be stressful. When it comes to finding the best mortgage rates, it definitely cannot hurt to shop around. When you find the right lender, it is time to get your finances straight. That means increasing your FICO score, finding lower priced homes, and moving to a cheaper area. Once you have chosen the terms for your mortgage, you’ll have to choose from fixed and variable mortgages. As soon as you choose the right type of mortgage, you are all set. If you enjoyed this article, share it on social media!
